Intelligize.com http://www.intelligize.com SEC Research made Simpler, Faster and Smarter Thu, 26 Jan 2012 17:29:45 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Conflict Minerals Update http://www.intelligize.com/blog/conflict-minerals-update/ http://www.intelligize.com/blog/conflict-minerals-update/#comments Thu, 26 Jan 2012 17:28:14 +0000 Intelligize staff http://www.intelligize.com/?p=884  

The Securities and Exchange Commission (SEC) recently updated its implementation timeline for new rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). One of the rules, disclosure related to “conflict minerals”, is now tentatively scheduled to be finalized sometime between January and June of 2012. The proposed rule was released in December of 2010 with the intention of finalizing the rule in 2011. The legislation called for a final rule no later than 270 days after enactment, or April 15, 2011. The impact could be far reaching considering the potential number of companies that may fall under the rule and has precipitated a significant amount of comment letters from various parties including associations representing manufacturing, mining, electronics and other interests; accounting firms; governmental organizations, non-governmental organizations and activist groups. There have been over 200 memoranda written by law firms and accounting firms on conflict minerals disclosure since the introduction of the legislation.

 

Based on the proposed rule( http://www.sec.gov/rules/proposed/2010/34-63547.pdf), Section 1502 of Dodd-Frank requires disclosure by “issuers who file reports with the Commission under Exchange Act Sections 13(a) or 15(d) and for which conflict minerals are “necessary to the functionality or production of a product manufactured” or contracted to be manufactured by such issuer.” The conflict minerals are gold and the underlying metal ores for tantalum, tin and tungsten. These issuers must disclose in the body of their annual reports whether any of the conflict minerals originated in the Democratic Republic of the Congo or adjoining countries (DRC countries) and the process used in making this determination, or the “reasonable country of origin inquiry process”. The Form 10-K would have a new item 4(a), the Form 20-F a new item 16 and the Form 40-F a new paragraph 16 to General Instruction B, all entitled Conflict Minerals Disclosure. Issuers would also have to disclose that the determination is available on its Internet website and the Internet address.

Issuers that determine the conflicts minerals did originate in a DRC country, are unable to determine that the conflict minerals did not originate in a DRC country or that the conflict minerals came from recycled or scrap sources must furnish (not file) a Conflict Minerals Report as exhibit 96 to the annual report. The report should contain “measures taken by the registrant to exercise due diligence on the source and chain of custody of the conflict minerals … a certified independent private sector audit of the Conflict Minerals Report … certification by the registrant that it obtained such an independent private sector audit … a description of any of the registrant’s products manufactured or contracted to be manufactured containing conflict minerals that are not “DRC conflict free” … the audit report prepared by the independent private sector auditor, which identifies the entity that conducted the audit.” The issuers must also disclose within the body of the annual report that a Conflict Minerals Report has been furnished as an exhibit along with the Internet address for the report and the certified independent private sector audit report on the issuer’s Internet website.

 

The legislation also tasks the U.S. Department of State, the Comptroller General of the United States and other federal agencies, besides the SEC, with various aspects of implementation. The Department of State is required to produce a map identifying “mineral rich zones, trade routes, and areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries” or “Conflict Minerals Map”( http://www.oesa.org/Doc-Vault/Industry-Information-Analysis/Conflict-Minerals/State-Department-Map-of-the-Congo.pdf). On July 15, 2011 the Department of State released a Statement Concerning Implementation of Section 1502 of the Dodd-Frank Legislation Concerning Conflict Minerals Due Diligence (http://www.state.gov/documents/organization/168851.pdf) urging issuers to begin their due diligence investigations immediately and endorsing the guidance issued by the Organization for Economic Cooperation and Development (OECD)( http://www.oecd.org/dataoecd/62/30/46740847.pdf) for implementing due diligence practices. The Comptroller General of the United States will establish the standards for the independent audit.

 

Several companies have made disclosures regarding conflict minerals within risk factors and as parts of material agreements. The SEC has even commented on it as part of the filing review process. Cree Inc., a North Carolina based manufacturer of LED lighting, described the potential cost increase from a compliance standpoint as well as acquisition of raw materials along with a possible reputational risk in the following risk factor in their January 19, 2012 10-Q:

  • New regulations related to conflict-free minerals may force us to incur additional expenses

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo (DRC) and adjoining countries. As a result, the SEC is required to establish new annual disclosure and reporting requirements for those companies who use “conflict” minerals mined from the DRC and adjoining countries in their products. When these new requirements are implemented, they could affect the sourcing and availability of minerals used in the manufacture of our products. As a result, we cannot ensure that we will be able to obtain minerals at competitive prices and there may be additional costs associated with complying with the new due diligence procedures as required by the SEC. In addition, as our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. 

Other companies such as Kirschner Medical Corp., Biomet Inc., Enphase Energy Inc., Nvidia Corp., Advanced Micro Devices, and Sprint Nextel have included disclosure about the proposed regulation in their risk factors over the past 90 days. Companies have also begun to disclose that they do not use conflict minerals from the DRC countries, though not in the manner outlined in the proposed rule. China Direct Industries, Inc., a Florida based producer and distributor of industrial products, disclosed the following in the Management’s Discussion and Analysis (MD&A) portion of their December 23, 2011 10-K:

  • As of September 30, 2011, our Magnesium segment represents our largest segment by assets and revenues. We manufacture and sell pure magnesium and related by-products sourced and produced in China. We also purchase and resell magnesium products sourced and produced in China by third parties. We do not engage in the use of “conflict minerals,” which are not necessary to the functionality or production of our magnesium products, nor do we manufacture or contract to manufacture our products from Democratic Republic of the Congo or adjoining countries.

Cabot Corp., a Massachusetts based producer of specialty chemicals and performance materials, reported the following under the description of business portion of their November 29, 2011 10-K:

  • Tantalum ore is the principal raw material used in this Business. The Business has not purchased or sourced any material containing tantalum, including coltan, from the Democratic Republic of the Congo. An independent audit conducted by a third party auditor assigned by the Electronics Industry Citizenship Coalition and Global e-Sustainability Initiative (as part of the Conflict-Free Smelter Validation Program) confirmed that our tantalum supply chain is free of conflict minerals. As part of the audit, we demonstrated that we have a documented conflict minerals policy, a mechanism in place for tracing material back to the mine of origin, and documentation demonstrating that 100% of purchased materials are from non-conflict sources.

Kemet Corp., a South Carolina based manufacturer of capacitors, announced in a press release attached to their January 13, 2012 8-K that they were implementing a conflict free tantalum sourcing plan and included the following:

  • Over the past year the company has taken multiple actions and developed a more comprehensive plan whereby tantalum ore is sourced directly from the conflict free Katanga Province of the DRC and delivered it to CFS certified smelters for processing in a closed-pipe system. The closed-pipe system for the sourcing and transit of tantalum ore is being managed consistent with both the Organization for Economic Cooperation and Development (OECD) due diligence guidance for responsible supply chains of conflict minerals as well as the current understanding of the yet to be promulgated Dodd-Frank 1502 legislation relating to the same issue. To date enough ore has been mined and shipped to produce one-to-two months’ supply of capacitor grade tantalum powder. It is anticipated that over time the mine will produce enough tantalum ore to satisfy over approximately two-thirds of KEMET’s tantalum powder and wire requirements, as well as additional ore for the general market.

Some issuers have even begun to include a conflict mineral clause within their material agreements. MetroPCS Communications, Inc., included the following clause in the Amendment No. 1 to Master Procurement Agreement with Ericsson, Inc. attached to the August 3, 2011 10-Q:

  • 2.4 Section 15.12.5, Conflict Minerals. The following new Section 15.12.5 is added to the Agreement immediately following Section 15.12.4 of the Agreement:

15.12.5 Conflict Minerals. Supplier represents and warrants that it is in full compliance with the Conflict Minerals Law. Upon MetroPCS’ written request, Supplier shall provide MetroPCS with a written copy of any audits, disclosures or reports filed with or submitted to the Securities and Exchange Commission by Supplier as required by the Conflict Minerals Law including, at a minimum, (a) the disclosures made by the Supplier to the Securities and Exchange Commission and (b) any independent private sector audit submitted through the Securities and Exchange Commission, each (a) and (b) in accordance with subsection (p) of Section 13 of the Securities and Exchange Act of 1934 and the Conflict Minerals Law. Without any further consideration, Supplier shall provide such further cooperation as MetroPCS may reasonably require in order to meet any obligations it may have under the Conflict Minerals Law.

 

The SEC has also commented on the inclusion of conflict minerals disclosure. In a September 16, 2010 letter to Rangold Resources Ltd. Regarding their March 31, 2010 20-F asking the following:

  • We note you operations in the Democratic Republic of the Congo (DRC) produce gold which is defined as a conflict mineral in the recent Doff-Frank Wall Street Reform and Consumer Protection Act.With a view toward possible disclosure, tell us whether or not you mining operations acquire or purchase gold and/or other conflict minerals from local mining companies and/or artisanal miners.

Rangold Resources Ltd., responded on October 8, 2010:

  • The Company respectfully advises the Staff that the Company’s Kibali Project in the Democratic Republic of the Congo is a development project which is currently at the feasibility stage, and consequently is not yet an operating mine and does not produce any gold. Furthermore, the Company does not purchase gold or other conflict minerals from any local mining companies and/or artisanal miners.

Intelligize will continue to follow this issue as the final rule is released to determine what changes have been incorporate, if any, the inclusion of a phase-in period and what new disclosures are being reported.

 

 
About Intelligize
Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.
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]]> http://www.intelligize.com/blog/conflict-minerals-update/feed/ 0 European Sovereign Debt Exposures http://www.intelligize.com/blog/european-sovereign-debt-exposures/ http://www.intelligize.com/blog/european-sovereign-debt-exposures/#comments Fri, 20 Jan 2012 16:02:16 +0000 Intelligize staff http://www.intelligize.com/?p=878 The Securities and Exchange Commission’s Division of Corporate Finance issued Disclosure Guidance Topic number 4 on January 6, 2012 regarding European sovereign debt exposures. This guidance was precipitated by the inconsistent disclosure “in both substance and presentation” provided by registrants, both domestic and foreign private issuers. 

The Division of Corporate Finance was particularly concerned with the exposure risks to financial institutions and referenced Industry Guide 3 which addresses disclosure requirements of bank holding companies. The Division highlighted the disclosure requirements where “current conditions in a foreign country give rise to liquidity problems which are expected to have a material impact on the timely repayment of principal or interest on the country’s private or public sector debt”.  The Disclosure Guidance indicated that the use of tabular disclosure within the Management’s Discussion & Analysis (MD&A) should be included as well as the exposure impacts within the risk factors. 

Though the Division of Corporate Finance did not indicate which particular European countries are covered in the guidance, noting “We expect that the countries covered by this analysis would vary and thus the disclosures should be sufficiently flexible to capture those risks as they change over time”; it did request that registrants disclose the basis for why they were identifying specific countries included in their disclosures.

The Disclosure Guidance emphasized three specific areas for enhanced disclosure the Division of Corporate Finance had previously commented on:

  • Gross sovereign, financial institutions, and non-financial corporations’ exposure, separately by country;
  • Quantified disclosure explaining how gross exposures are hedged; and
  • A discussion of the circumstances under which losses may not be covered by purchased credit protection.

In its 11/16/2011 comments to Bank of Nova Scotia regarding the 6-K filed 8/30/2011, the Division of Corporate Finance requested almost exactly the same disclosure as above regarding Bank of Nova Scotia’s reported exposure to banks in Portugal, Ireland, Spain and Italy. This enhanced disclosure can be seen on the 12/2/2011 Bank of Nova Scotia 40-F with tabular disclosure by country within the MD&A.

 

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]]> http://www.intelligize.com/blog/european-sovereign-debt-exposures/feed/ 0 Foreign Corrupt Practices Act Trends http://www.intelligize.com/blog/foreign-corrupt-practices-act-trends/ http://www.intelligize.com/blog/foreign-corrupt-practices-act-trends/#comments Thu, 22 Dec 2011 17:23:27 +0000 Intelligize staff http://www.intelligize.com/?p=874

Foreign Corrupt Practices Act Trends

The Foreign Corrupt Practices Act (FCPA) has recently been in the news again. On December 13 the Securities and Exchange Commission filed a civil action in the Southern District of New York against seven former executives of Siemens AG for allegedly bribing senior government officials in Argentina. Also this month Wal Mart Stores disclosed in their 10-Q that they had begun an internal investigation into possible FCPA violations following a review of their ant-corruption policy.

The FCPA was enacted in 1977 to prohibit payments to foreign officials in order to obtain or retain business and is jointly enforced by the U.S. Department of Justice and the Securities and Exchange Commission. 2011 has been a busy year so far for FCPA cases by the SEC. Besides the action against the former Siemens executives mentioned above, companies such as Ball Corporation, Comverse Technology, Diageo, International Business Machines, Johnson & Johnson and Tyson Foods have also been the subject of FCPA cases by the SEC this year.

The FCPA also has generated disclosures from issuers in their risk factors and material agreements. Recent risk factor disclosure ranges from the generic as seen in Northern Technologies International Corp 11/21/11 10-K:

  • Failure to comply with the U.S. Foreign Corrupt Practices Act could subject NTIC to, among other things, penalties and legal expenses that could harm its reputation and have a material adverse effect on its business, financial condition and results of operations.

To disclosure of specific instances as seen in the 10/28/11 10-Q of Hercules Offshore:

  • Any violation of the Foreign Corrupt Practices Act or similar laws and regulations could result in significant expenses, divert management attention, and otherwise have a negative impact on us. We are subject to the Foreign Corrupt Practices Act (the “FCPA”), which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business, and the anti-bribery laws of other jurisdictions. On April 4, 2011, we received a subpoena from the SEC requesting that we produce documents relating to our compliance with the FCPA. We have also been advised by the Department of Justice that it is conducting a similarinvestigation. Under the direction of the audit committee, we are conducting an internal investigation regarding these matters. Any determination that we have violated the FCPA or laws of any other jurisdiction could have a material adverse effect on our financial condition. 

 

Beyond risk factor disclosure issuers also included compliance clauses in their material exhibits. Diodes Incorporated filed a lease for an office in Shanghai on their 11/09/11 10-Q which contains the following clause:

16. Compliance with the Foreign Corrupt Practices Act

16.1 Ding Hong acknowledges that DSH is a corporation with substantial presence and affiliation in the United States and, as such, is subject to the provisions of the Foreign Corrupt Practices Act of 1977 of the United States of America, 15 U payments (the “FCPA”). Under the FCPA, it is unlawful to pay or to offer to pay anything of value to foreign government officials, or employees, or political parties or candidates, or to persons or entities who will offer or give such payments to any of the foregoing in order to obtain or retain business or to secure an improper commercial advantage.

16.2 Ding Hong further acknowledges that it is familiar with the provisions of the FCPA and hereby agrees that Ding Hong shall take or permit no action which will either constitute a violation under, or cause DSH to be in violation of, the provisions of the FCPA. 

While Cyber Informatix included an FCPA clause within an employment agreement filed as an exhibit to a 10/06/11 8-K: 

Foreign Corrupts Practices Act

 

The Company and the Executive each represent and warrant that it is aware of and familiar with the provisions of the Foreign Corrupt Practices Act of 1977, as amended by the Omnibus Trade and Competitiveness Act of 1988 (“FCPA”), and the rules and regulations thereunder, and its purpose. Each party agrees that it will take no action and make no payment in violation of, or which might cause the Company or the Executive to be in violation of, the FCPA, including, but not limited to, the making of unlawful payments to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds

The SEC has also focused on these disclosures while reviewing filings. Yayi International was asked to “briefly describe the safeguards you have in place to discourage FCPA violations by your employees” in relation to a risk factor in their 10/27/10 S-1. The SEC asked Grifols SA to expand their FCPA risk factor to include the “actions involved in the possible violations of the FCPA that you have identified and the countries where there are potential violations” during the review of an 8/10/10 F-4.

 
About Intelligize
Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.
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]]> http://www.intelligize.com/blog/foreign-corrupt-practices-act-trends/feed/ 0 SEC Comment Letter Process Update http://www.intelligize.com/blog/sec-comment-letter-process-update/ http://www.intelligize.com/blog/sec-comment-letter-process-update/#comments Mon, 12 Dec 2011 16:57:17 +0000 Intelligize staff http://www.intelligize.com/?p=858 SEC Comment Letter Process Update

The Securities and Exchange Commission released an update to their filing review process on December 1st. Beginning January 1, 2012, the staff will release the comment and response letters as early as 20 days following the completion of a filing review. This is down from the current 45 day policy. Below is the full text of the release and a link to it on the SEC website

SEC Staff to Release Filing Review Correspondence Earlier

Since May 12, 2005, the staff of the Securities and Exchange Commission has been publicly releasing through the EDGAR system comment letters and response letters relating to disclosure filings reviewed by the Divisions of Corporation Finance and Investment Management. See Press Release No. 2005-72 (May 9, 2005). Since the inception of the program, the stated goal has been to release the correspondence “no earlier than 45 days after the review of the disclosure filing is complete.” To further enhance the transparency of the filing review process, beginning January 1, 2012, the staff will release filing review correspondence no earlier than 20 business days following the completion of a filing review.
http://www.sec.gov/divisions/corpfin/cfannouncements/edgarcorrespondence.htm

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Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.

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]]> http://www.intelligize.com/blog/sec-comment-letter-process-update/feed/ 0 Say on Pay http://www.intelligize.com/blog/say-on-pay/ http://www.intelligize.com/blog/say-on-pay/#comments Thu, 08 Dec 2011 22:20:51 +0000 Intelligize staff http://www.intelligize.com/?p=862

Say on Pay

The Dodd-Frank legislation required the implementation of say-on-pay or advisory votes on executive compensation for many companies in 2011. The legislation requires non-binding votes on the executive compensation packages at least every three years as well as a non-binding vote on how often the advisory votes are to be implemented with most companies recommending an option of annual, biennial or triennial votes.

Looking at the results for the S&P 500 so far this year the annual say-on-pay option was by far the most popular among company shareholders with approximately 453 choosing this option. A triennial vote was chosen by approximately 26 companies including Amazon.com, Berkshire Hathaway, CBS, Comcast, Google and United Parcel Service. Only one company, Hormel Foods, has selected the biennial option at this time. Four companies, American International Group, M&T Bank, Regions Financial and Zions Bancorp are still under the TARP requirements of an annual say-on-pay vote and are not required to hold a vote on the frequency until they no longer have any TARP obligations. 

Overall advisory votes on executive compensation held in 2011 did see certain instances where the shareholders did not approve the compensation. IsoRay, Stanley Black & Decker, Cogent Communications Group, Janus Capital Group, Intersil, Helix Energy Solutions, Nutri System, Cadiz, Synaptics, Masco and Regis all failed to have their executive compensation approved.  Regis was involved in a proxy fight this year with Starboard Value LP. Nutri System, Intersil, Janus Capital Group, Stanley Black & Decker and Helix Energy Solutions have become the subject of shareholder derivative suits based on the failed say-on-pay votes.

Interestingly, the Dodd-Frank requirement eliminating broker discretionary voting in executive compensation matters may have also influenced the failed votes since many times these shares are voted in favor of management.   

The SEC also commented on the say-on-pay disclosures of companies this year. Companies were reminded to include the option to abstain from voting as a choice in the frequency of executive compensation voting along with the annual, biennial and triennial options. The SEC also requested that companies clarify their disclosure on the advisory vote to include the idea of voting for or against, or abstaining from voting, on the approval of executive compensation instead of merely stating an advisory vote on executive compensation. The CD&A section was also addressed to incorporate how the results of a 2010 say-on-pay vote determined 2011 executive compensation.  

Intelligize will to continue to follow the say-on-pay issues include the golden parachute advisory votes. 

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Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.

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]]> http://www.intelligize.com/blog/say-on-pay/feed/ 0 Recent IPO Comments http://www.intelligize.com/blog/ipo-comments/ http://www.intelligize.com/blog/ipo-comments/#comments Fri, 02 Dec 2011 14:32:57 +0000 Intelligize staff http://www.intelligize.com/?p=856 November 2011 was the busiest month for initial public offerings since July with 13 deals. These included some well-known names such as Groupon and Angie’s List. To gauge what the Securities and Exchange Commission may be looking for in IPO disclosures we looked at some other well-known names that launched earlier this year, Dunkin’ Brands Group, LinkedIn, Pandora Media and Zipcar. The SEC provided several comments on all of these registrations. Below are some of the subjects addressed.

One topic that all four of the registrants received comments on was the use of information from third parties. The SEC requested that any information from third party sources such as reports or statistics utilized in the registration be cited by the registrant and noted if it was from a publicly available source. If the report or information was created specifically for the registrant a consent statement from the third party should be included with the registration. Along with the four issuers we examined the SEC also commented on eight other S-1 IPO registrations so far this year regarding the use of third party information.

A second topic of interest to the SEC is the disclosure of estimated cost associated with becoming a public company. Pandora Media, Dunkin’ Brands Group, LinkedIn, as well as 10 other registrants, received requests to expand the disclosure to include “quantitative information regarding the estimated costs of becoming a public company.” Many disclosed the specific regulations that may affect them upon becoming a public company but did not associate actual estimated costs of compliance.

Dunkin’ Brands Group, Pandora Media and Zipcar were requested to provide a better balance of information within the prospectus summary instead of focusing on just the positive aspects of the company. The SEC suggested inclusion of potential challenges to implementing business strategies, current debt levels, and estimated future operating losses as potential examples to provide a broader picture of the companies to potential investors. This same type of comment was received by 10 other registrants launching IPOs on S-1s so far this year.

The final topic we examined is the disclosure of management and director experience. Zipcar, Dunkin’ Brands Group and eight other registrants were requested to provide the business experience for each individual manager and director listed in the S-1. The SEC referenced question 116.05 of the Division of Corporation Finance’s Compliance and Disclosure Interpretations under Regulation S-K as guidance.

The topics above are some of the areas the SEC highlighted and appeared in comments issued to several registrants seeking a public offering on Form S-1 this year. Intellegize will continue to monitor topics as additional comments are made publicly available.

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Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.

]]> http://www.intelligize.com/blog/ipo-comments/feed/ 0 Shareholder Proposals-Update and Trends http://www.intelligize.com/blog/shareholder-proposals-update-and-trends/ http://www.intelligize.com/blog/shareholder-proposals-update-and-trends/#comments Wed, 23 Nov 2011 15:48:32 +0000 Intelligize staff http://www.intelligize.com/?p=846  

Shareholder Proposals-Update and Trends 

As part of the preparation for the annual shareholders meeting, proposals to be voted on are presented by both the company and shareholders. The shareholder proposals are governed by rule 14a-8 of the Securities Exchange Act of 1934. The rule includes eligibility requirements for shareholders as well as instances in which the company may exclude these proposals. In almost all occasions the company will request that the Securities and Exchange Commission not take enforcement action if the proposals are excluded by submitting a No Action request.

 

 From June 1, 2011 through November 18, 2011 there have been 33 letters received or reviewed by the SEC. Of these, four letters have been withdrawn by the requestor following the proponent’s withdrawal of the proposals. The SEC has reviewed eleven letters concurring in all but two instances.  The most popular proposals in this time period are:

 

  • Implementation of an auditor rotation policy
  • A report on political contribution policies
  • Separation of the CEO and Chairman roles  
  • Requests for a simple majority voting standard
  • Board declassification
  • Ability of 10% or more shareholders to call a special meeting

 

Deere & Company submitted the most requests with six letters followed by Fedex Corporation with four and The Walt Disney Company with three requests. The leading proponent in this period was the United Brotherhood of Carpenters Pension Fund with four proposals; three of which were for an auditor rotation policy.

 

 The leading reasons to request exclusion of the proposals were the failure to prove the required ownership of stock by the proponents, which Deere & Company invoked in five of their letters; or that the proposals dealt with ordinary business operations, which The Walt Disney Company invoked in two letters. Both of these grounds to exclude were used in eight of the No Action letters.  The next leading reason was that the proposal had already been substantially implemented by the company. This exclusion was utilized seven times, twice by Fedex Corporation.

 

 The two instances in which the SEC did not concur were requests by Bob Evans Farms and Constellation Energy Partners LLC. The Bob Evans Farms letter regarded a proposal by The Humane Society of the United States to “phase in the use of “cage-free” eggs for use in Bob Evans restaurants, so that they represent at least five percent of the company’s total egg usage. ” Bob Evans sought to exclude the proposal on the grounds that: (1) it involved the ordinary business operations of the company, (2) it related to operations that were less than 5% of either the issuer’s total assets, net income, or gross revenue for the most recent fiscal year, (3) that the proposal had been substantially implemented already by the company, (4) that the proposal contained materially false or misleading statements. The Constellation Energy Partners LLC letter sought to exclude a proposal by Investment Partners Opportunity Fund requesting “the Company’s Board of Managers (the “Board”) resume paying quarterly cash distributions of an appropriate amount relative to members’ equity.” Constellation challenged inclusion of the proposal because (1) it was not a proper subject for action by unit holders under the laws of the jurisdiction of the company’s organization and (2) it involved ordinary business operations. In both cases the companies included the respective proposals in their subsequent proxies but neither proposal received enough votes.

 

 One proposal of interest is the auditor rotation policy. It would require a company to have their audit firm rotate off engagement for a minimum time period. The SEC is still reviewing the three letters from this year by Deere & Company, Hewlett-Packard and Walt Disney but did concur in the exclusion of proposals under the ordinary business basis in letters submitted by Masco and JPMorgan Chase last year. 

 

 On August 16, 2011 The Public Company Accounting Oversight Board (PCAOB) issued a Concept Release proposing a mandatory audit firm rotation as a method to enhance auditor independence and requesting comments by December 14. Intelligize will continue to follow the shareholder proposals as proxy season progresses. 

 

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Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.


]]> http://www.intelligize.com/blog/shareholder-proposals-update-and-trends/feed/ 0 SEC Trending – Cybersecurity http://www.intelligize.com/blog/sec-trending-cybersecurity/ http://www.intelligize.com/blog/sec-trending-cybersecurity/#comments Wed, 23 Nov 2011 15:45:00 +0000 Intelligize staff http://www.intelligize.com/?p=840  

 Cybersecurity Disclosure

 

 

The Securities and Exchange Commission’s Division of Corporate Finance issued CF Disclosure Guidance: Topic No. 2 Cybersecurity on October 13, 2011. It provides assistance in the preparation of disclosure obligations under the Securities Act of 1933 and the Exchange Act of 1934 in relation to cybersecurity risks and cyber incidents for domestic and non-U.S. registrants.

 

Recent incidents against Facebook, Google, NASDAQ and Lockheed Martin highlight the risks companies now face and the potential impact on their business operations. One area of focus within the guidance is the disclosure of risk factors and provides five specific elements to consider. Below are the elements along with recent examples of disclosures for each. The issuers include various industries and are both U.S. and non-U.S. registrants.

 

All of the disclosures below are so new, considering that the guidance was issued on October 13, to determine just how the SEC will view them. At the very least, they do provide some insight into how disclosures may be phrased. Intelligize will continue to follow this issue as the SEC comments further clarify this guidance.

 

1.   Discussion of aspects of the registrant’s business or operations that give rise to material cybersecurity risks and the potential costs and consequences.

River Valley Bancorp, an Indiana bank, disclosed in its 11/14/11 10-Q:

 

 We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks. Our business employs systems and a website that allow for the secure storage and transmission of customers’ proprietary information. Security breaches could expose us to a risk of loss or misuse of this information, litigation and potential liability. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

 

CME Group, parent of futures exchanges including the Chicago Mercantile Exchange and New York Mercantile Exchange disclosed in its 11/9/11 10-Q the following:

 

 Our role in the global marketplace may place us at greater risk for a cyber attack and other cyber security risks.

In connection with the continued economic uncertainty, groups such as Occupy Wall Street and Anonymous, have targeted the financial services industry as part of their protest against the perceived lax regulation of the financial sector and economic inequality. For example, the Anonymous group called on its supporters to launch a “distributed denial of service” attack to overwhelm website traffic on NYSE Euronext’s external Web site which resulted in a brief outage. While we have no evidence at this time that we are a specific target of a cyber attack, our role in the global marketplace places us at greater risk. Additionally, our role as a leading derivatives marketplace and the operation of our CME Globex electronic trading platform may place us at greater risk for misappropriation of our intellectual property. In September 2011, a former employee of CME Group was charged with two counts of theft of trade secrets in an indictment returned by a federal grand jury. We do not believe that any customer information, trade data or required regulatory information was compromised in this incident and we have no evidence that the trade secrets were distributed in connection with this matter. While we continue to employ resources to monitor the environment and protect our infrastructure against security breaches and misappropriation of our intellectual property assets, these measures may prove insufficient depending upon the attack or threat posed, which could result in system failures and delays that could cause us to lose customers, experience lower trading volume, incur significant liabilities or have a negative impact on our competitive advantage.

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2.    To the extent the registrant outsources functions that have material cybersecurity risks, description of those functions and how the registrant addresses those risks.

 

Avatar Holdings Inc, a real estate company headquartered in Florida, disclosed in their 11/14/11 10-Q:

 

As we continue to increase our dependence on digital technologies to conduct operations, our risks associated with cybersecurity have also increased, leaving us subject to possible frequent and severe cyber incidents.

 

For a number of years, we have been increasing our reliance on computers and digital technology. Many of our files have been digitized and more of our employees are working in almost paperless environments. We have also made changes, some significant, to our hardware and software environments and some of these transitions have not been successful, taken longer than anticipated and/or are still in progress. All of these activities may give rise to material cybersecurity risks and potential costs and consequences that cannot be estimated or predicted with any certainty. We have outsourced a number of our IT functions including IT support of our infrastructure and software. We identified a failure to establish appropriate security policies as a result of outsourcing and we believe that we addressed the situation before any security breaches actually occurred. We are continuing to take steps to secure our confidential information from our vendors as well as third parties who may be seeking to infiltrate our systems. While we have had issues with IT controls, we are in the process of implementing better controls or conducting more testing of our accounting and other functions to confirm that such control issues have not affected the accuracy of our financial and other reporting. At this time we do not have any specific insurance for cybersecurity events. Management will continue to monitor our IT environment and determine whether our business operations merit further insurance coverage. Notwithstanding the concern of management regarding cybersecurity, we consider a future cyber attack a material concern that could have severe financial and other business implications.

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3.    Description of cyber incidents experienced by the registrant that are individually, or in the aggregate, material, including a description of the costs and other consequences.

 

Sony, the Japanese electronics and entertainment company, reported on specific incidents in an 11/14/11 6-K:

 

Beginning earlier in 2011, the network services of PlayStation®Network, QriocityTM, Sony Online Entertainment LLC and websites of other subsidiaries came under cyber-attack. As of November 14, 2011, Sony has not received any confirmed reports of customer identity theft issues or misuse of credit cards from such cyber-attacks. However, in connection with certain of these matters, Sony has received inquiries from authorities in a number of jurisdictions, including orders for reports issued by the Ministry of Economy, Trade and Industry of Japan as well as the Financial Services Agency of Japan, formal and/or informal requests for information from Attorneys General from a number of states in the United States and the U.S. Federal Trade Commission, various U.S. congressional inquiries and others. Additionally, Sony Corporation and/or certain of its subsidiaries have been named in a number of purported class actions in certain jurisdictions, including the United States. Based on the current stage of these inquiries and proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of these matters.

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4.    Risks related to cyber incidents that may remain undetected for an extended period.

 

 

Penson Worldwide, a Dallas, Texas based financial services company, reported the following in its 11/9/11 10-Q:

 

Our business is highly dependent upon the use of electronic transmission of information and we could incur substantial monetary and reputational damages if we are unable to maintain the security of our cyber network

 

As part of our daily operations, we transmit personal customer information over computer systems and the Internet. Although we believe our transmission of information is secure, cyber attacks may go undetected, and embedded malware could affect our cyber network without our knowledge for long periods of time. To effect secure transmissions of confidential information over computer systems and the Internet, we rely on encryption and authentication technology. While we periodically test the integrity and security of our systems, we cannot assure you that our efforts to maintain the security of our cyber network will be successful. 

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5.    Description of relevant insurance coverage.

 

Arkansas Best Corp, a motor carrier freight transportation company headquartered in Fort Smith, Arkansas disclosed in their 11/8/11 10-Q:

 

Information Technology and Cybersecurity

 

The Company depends on the proper functioning and availability of its information systems, including communications and data processing systems, in operating its business. These systems consist of proprietary software programs that are integral to the efficient operation of the Company’s business. The data that is processed by these systems is important to remain confidential and includes competitive customer information, employee records and key financial and operational results and statistics. Portions of the Company’s business utilize information systems that provide critical services to both our employees and our customers. Cyber incidents that impact the availability, reliability, speed, accuracy or other proper functioning of these systems could have a significant impact on the Company’s operating results. Certain of the Company’s software applications are utilized by third parties who provide certain outsourced administrative functions, which may increase the risk of a cybersecurity incident. The Company’s information systems are protected through physical and software safeguards as well as backup systems considered appropriate by management. However, it is not practicable to protect against the possibility of power loss, telecommunications failures, cybersecurity attacks and similar events in every potential circumstance that may arise. The Company’s business interruption insurance, which would offset losses up to certain coverage limits in the event of a catastrophe, would not specifically extend to losses arising from a cyber incident. A significant cyber incident, including system failure, security breach, disruption by malware or other damage could interrupt or delay the Company’s operations, damage its reputation and cause a loss of customers. The Company has experienced incidents involving attempted denial of service, malware attacks and other events intended to disrupt information systems, wrongfully obtain valuable information or cause other types of malicious events that could have resulted in harm to the Company’s business. Up to the present, the systems employed by the Company have been effective in identifying these types of events at a point when the impact on the Company’s business could be minimized. The Company has made and continues to make significant financial investment in technologies and processes to mitigate these risks. Management is not aware of a cybersecurity incident that has had a material effect on the Company’s operations, although there can be no assurances that a cyber incident that could have a material impact to the Company will not occur.

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About Intelligize

Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources for SEC research, peer analysis, and compliance.

 

]]> http://www.intelligize.com/blog/sec-trending-cybersecurity/feed/ 0 Welcome Rob Peters! http://www.intelligize.com/blog/welcome-rob-peters/ http://www.intelligize.com/blog/welcome-rob-peters/#comments Tue, 15 Nov 2011 14:20:29 +0000 cwalunas http://www.intelligize.com/?p=822 Intelligize is further expanding it’s customer support resources.  In an effort to provide superior service to our customer base, Intelligize is pleased to welcome Rob Peters who will be heading up our Customer Support group.  Rob comes to Intelligize with a wealth of SEC research and editorial experience.  Rob previously managed Customer Support and Research for Global Securities Information (publishers of LIVEDGAR) and it’s subsequent Acquirer, Thomson Reuters.  Rob will primarily be focused on handling customer’s complex research requests and will be available for projects as an ad hoc extension to law firm research groups.  Rob will also be monitoring and providing proactive information to our clients regarding trends and hot topics coming from the Securities and Exchange Commission.  Rob will be working in both the Washington DC office as well as our New York headquarters. Rob is a graduate of Penn State with a B.A. in pre- law.  Welcome Rob.

]]> http://www.intelligize.com/blog/welcome-rob-peters/feed/ 0 Intelligize Continues Growth – Moves Headquarters http://www.intelligize.com/blog/intelligize-continues-growth-moves-headquarters/ http://www.intelligize.com/blog/intelligize-continues-growth-moves-headquarters/#comments Tue, 02 Aug 2011 20:56:09 +0000 Todd http://www.intelligize.com/?p=647 New York, NY August 2nd, 2011

Intelligize, Inc. has moved it’s headquarters to a larger space to accomodate it’s rapid growth.  ”We have been fortunate to be in such a growth mode given some of the challenges in the economy”,  says Gurinder Sangha, CEO of Intelligize  ”We continue to add both Fortune 500 corporations and top Am Law firms at a very fast pace and we expect that pace to continue.”

OUR NEW ADDRESS IS:

Intelligize, Inc.

261 Fifth Avenue

Suite 1414 

New York, NY  10016 

Main Phone : 917-261-2060

 

Intelligize, Inc. is the leading provider of SEC solutions tools that are Simpler, Faster and Smarter in providing professionals with resources in the realms of SEC research, analysis, and compliance.

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